Our Eight Investment Pillars

In rapidly evolving financial markets, it’s critical to have framework to your support investment decisions. Our Investment Pillars act as a ‘true north’ and govern our approach to investing the funds of our members.

1. Start with asset allocation

The core driver of investment returns is the overall composition of your investments, not the specific holdings within your portfolio.1,2

2. Know your timeframe

Investments become profitable when they are sold. Understanding your investment timeframes offers clarity on your optimal asset base and the likely outcomes.3

3. Diversify

An appropriately diversified portfolio reduces investment risk and allows investors to pursue opportunities with higher expected return profiles.4

4. Keep fees down

Fees erode investment balances and should minimised wherever possible. When paying premiums in pursuit of outperformance, we seek those that can demonstrate this outperformance versus simply promising it5,6

5. Invest sustainably

A global focus on sustainability is having a direct impact on long-term asset values. Independent research now demonstrates lower volatility in sustainable portfolios, particularly those with a focus on climate.7,8,9

6. Be willing to pivot

Holding the same assets throughout the market cycle will rarely produce the best outcomes. A dynamic asset allocation addresses the short-term risks within portfolios and can deliver additional returns reduce portfolio risks.10,11,12

7. Be alert to portfolio turnover

Portfolio turnover has a meaningful impact on net returns, due to transaction fees and higher taxes paid. Fund manager / ETF performance must therefore be assessed against portfolio turnover to evaluate whether the stated outcomes are ‘real world’.13

8. Seek transparency

Investors should always know what they hold and the risks that are present within their portfolio.

Sources:

  1. Determinants of Portfolio Performance, Brinson, Hood and Beebower, 1986
  2. The Global Case for Strategic Asset Allocation, Vanguard July 2012
  3. Stock Returns and Holding Periods, Griffith University, Li et al., 2012
  4. Portfolio selection, Harry Markowicz, 1952
  5. Shopping for Alpha: You Get What You Don't Pay For (Wallick et al., 2011)
  6. The Better-of-Two Strategy for Active Management: Dynamically Combining (and Valuing) Active and Passive Portfolios Through Time (Fox and Hammond, 2020)
  7. Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds, Morgan Stanley, 2019
  8. ESG Shareholder Engagement and Downside Risk, Hoepner et al, 2021
  9. The Impact of ESG on Stocks’ Downside Risk and Risk Adjusted Return, Loof and Stephan, 2019
  10. A case for dynamic asset allocation for long term investors, Gabriel Petre, Elsevier & World Bank, 2015
  11. Dynamic Asset Allocation, First Sentier Investors Multi Asset Solutions Research Papers, Feb 2014
  12. Investment time horizon and asset allocation models, Swiss Society for Financial Market Research, Lenoir & Tuchschmid, 2001
  13. Using ETFs to generate efficient after-tax outcomes, David Bassanese, Betashares, 2015